HTC Posts Record-Low Profit After Latest Smartphone Delayed

HTC Corp. (2498), Taiwan’s largest smartphone maker, posted its lowest quarterly profit on record after the delay of its newest flagship phone caused revenue to miss the company’s target.

First-quarter net income plunged 98 percent to NT$85 million ($2.8 million), the sixth straight decline, according to data released by the Taoyuan, Taiwan-based company yesterday. The average of 19 analysts’ estimates compiled by Bloomberg was for profit of NT$600 million.

HTC lost early momentum for its HTC One handset in February as a shortage of camera components forced it to delay shipments in key markets by as much as a month. Prospects for revenue to rebound this quarter may be limited as the new device becomes widely available less than a month before Samsung Electronics Co.’s new Galaxy S4, which goes on sale in the U.S. on April 26.

“These numbers show the production shortage really is that bad, and my sense is that it won’t get much better in the second quarter because many of those issues continue,” said Dennis Chan, an analyst at Yuanta Securities Co. in Taipei, who recommends selling the stock. “For smartphones, timing is everything and the delay means they lose that timing.”

First-quarter revenue fell 37 percent from a year earlier to NT$42.8 billion, according to data compiled by Bloomberg. That’s less than the NT$54.7 billion average of 19 analyst estimates compiled by Bloomberg.

Operating Profit

Operating profit, or income from its core business of making and selling mobile devices, fell 99 percent to NT$43 million. Operating margin was 0.1 percent, according to data compiled by Bloomberg, missing HTC’s forecast for 0.5 percent to 1 percent.

Chief Executive Officer Peter Chou is betting on HTC One to revive fortunes at a company that’s lost more than 70 percent of its market value since a peak two years ago. Only three of 33 analysts surveyed by Bloomberg recommend buying the stock, while 20 recommend selling it.

Delay in shipments of the HTC One was caused by less-than-expected manufacturing capacity for the device’s camera, Benjamin Ho, the company’s marketing chief, said March 25. Production volume for the components will continue to rise through to the end of April, Ho said at the time.

Facebook’s Home

Resolution of those production problems and Facebook Inc.’s introduction last week of HTC First, a handset which debuts its Home software that features the social networking site on the device’s home screen, provides an opportunity for revenue to climb this quarter.

Ho, who was appointed in January, said last month he plans to boost spending and refresh the brand, after its global market standing dropped. Successive versions of Apple Inc.’s iPhone and Samsung’s Galaxy, and growing competition from ZTE Corp. (000063) and Huawei Technologies Co. cut its share of smartphone shipments to 3.1 percent in the fourth quarter, from 10.3 percent in the third quarter of 2011, according to Bloomberg Industries.

HTC dropped 2.2 percent to close at NT$241 in Taipei yesterday before the earnings announcement, taking its decline this year to 20 percent and trailing the benchmark Taiex (TWSE) index’s 0.7 percent advance.

Founded in 1997, HTC hasn’t posted a loss since it listed in March 2002. Two of 19 analysts surveyed by Bloomberg before yesterday’s earnings announcement forecast a net loss for the first quarter.